Lifecycle: End Game - Pharmaceutical Executive


Lifecycle: End Game
In their twilight years, old brands are increasingly being snapped up by specialty marketers rather than kicked to the curb

Pharmaceutical Executive

Safety Drug Withdrawals, 1997–2001
The "Top 200 Drugs, 1975–1995" chart (page 107) reveals certain characteristics of the top 200 drugs for those five years. The number of branded products decreased, from 185 in 1975 to 142 in 1995. Meanwhile, the number of generics in the top 200 increased from 15 in 1975 to 58 in 1995. Clearly, the generic sector grew dramatically as cost-containing MCOs stepped into the market.

The "Status of Branded Drugs, 2005" chart (right) tracks the growing trend to sell off branded drugs in the top 200 list. For example, in 1975, 185 were branded products, while 15 were generic; by 2005, 56 of those branded products were still with the original manufacturer, while 38 were with a new owner, and another 91 had been discontinued.

These findings are suggestive. The number of branded drugs that are still promoted by the original manufacturers in 2005 increased, from 56 in 1975 to 105 in 1995. An obvious explanation for this increase is that more-recent drugs have longer patent life remaining, so there is no compelling reason to unload them from the innovator's portfolio. Similarly, the number of branded drugs discontinued in 2005 decreased, from 91 (from 1975) to 13 (from 1995).

New Drug Approvals, 1994–2004
However, as of 2005, the number of branded drugs that were with a different manufacturer increased from 1975 to 1985—and then diminished. This may be because without further investment in sales force and promotional activities, revenues from end-of-lifecycle branded drugs tend to decrease gradually and finally disappear. After a certain point, an old drug cannot make enough profits even for a specialty pharma and is dropped.

The "New Sellers of End-of-Lifecycle Drugs" and "Innovators of End-of-Lifecycle Drugs" charts (both above) portray the distribution of the original manufacturers of old products as well as the specialty pharmas that took over ownership. Among the total 85 products, the innovators were mainly large-cap pharmas: Wyeth was the number-one developer and owner, with 16 branded drugs, followed by Bristol-Myers Squibb and Eli Lilly, with 10 each. By contrast, the distribution of the secondary sellers spreads out widely. Most specialty pharmaceutical companies own three products or less—with the notable exception of Monarch, a division of King, which has 10 of the total. It is also rlikely that certain branded pharmas are more actively divesting end-of-lifecycle products than others. Wyeth, for example, sold a significant number, while Pfizer only parted with a few of its supply.

The End-of-Lifecycle Business

Why would a multibillion-dollar drugmaker decide to jettison a few end-of-lifecycle products with low sales? The most obvious answer is that limited profitability of such drugs makes streamlining the portfolio very attractive.

But that is not the only reason. For a firm that wants to be thought of as a leader in new treatments or technologies, it is unwise to continue selling "old-fashioned" products like reserpine or thyroid extract. Or it may be that over the years, a company's R&D focus has shifted into other therapeutic areas, and maintaining a field force to support one drug in its own category is no longer cost-effective.


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